‘Populist Policies’ May Take Toll on Pertamina Assets

The logo of state-owned oil and gas company Pertamina (Shutterstock.com/Casimiro PT )

The government has allowed state-owned energy company Pertamina to sell some of its assets to improve its financial position, which has come under pressure largely as a result of fuel subsidies aimed at keeping gasoline and diesel cheap for consumers.

In a letter obtained by The Jakarta Post on Wednesday, State-owned Enterprises (SOEs) Minister Rini Soemarno grants Pertamina permission to conduct several measures “in order to save the firm’s financial situation”.

The SOEs Ministry’s undersecretary for mining, strategic industries and media affairs, Fajar Harry Sampurno, confirmed the letter, calling it the initial approval for the release of assets because of the upward trend in global crude prices.

“However, any corporate action must pass through a thorough study, should be reported to commissioners and must be approved in a shareholders meeting,” he said.

Previously, Institute for Development of Economics and Finance (INDEF) economist Bhima Yudhistira said the real burden for Pertamina were “populist government policies” he described as “a ticking bomb” for the company’s finances.

There were at least two government policies that would affect Pertamina’s cash flow, he explained, namely maintaining the low price of Premium-branded gasoline in Java, Madura and Bali as well as the general pricing policy for gasoline sold across country.

Premium-branded gasoline is sold at Rp 6,450 (46 US cents) per liter, far below the market price of Rp 7,350. Meanwhile, Finance Minister Sri Mulyani Indarwati has announced that the government will soon increase the subsidy for Solar-branded diesel.

Pertamina has had to shoulder trillions of rupiah worth of subsidies to sell Premium and Solar fuels at below-market prices. (bbn)